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The process for exiting a business is about more than just numbers and contracts; it’s about the people in your organization. From front-line employees to executives, everyone plays a crucial role in creating and maintaining the value of the business. The involvement of your people in the exit process needs to be handled thoughtfully and delicately, requiring trust and discretion. Here’s how to support them throughout the transaction.
Before the sale — say nothing
When should the owner inform employees that the business is being sold? Not until the sale is final and the buyer has officially taken possession. This is the number one rule: only the owner, their transition team, and possibly one critical team member should know about it until after the transaction is complete.
Prematurely revealing this information can have several adverse results:
- Early departure: Hearing about a pending sale can cause fear and uncertainty, leading employees to leave before the sale is finalized.
- Legal challenges: Early departures could make it look like a misrepresentation to the buyer, potentially leading to legal challenges.
- Delayed transition: A strong team is a significant value driver, and without one, the owner may need to stay on temporarily to facilitate the transition.
- Demand for compensation: Employees who learn of the sale might demand bonuses or raises, affecting profitability and sale value.
Without adequate precautions, keeping your plan under wraps could be easier said than done.
Announcing the sale
Once the sale is final, communication should be strategic and focus on the positive aspects. Start by informing the management team first and then have a full team meeting celebrating the event and highlighting the opportunities that the new owner brings.
One of the first questions will be whether the new owner will make significant changes. This is rarely a concern in small to mid-sized business sales, as buyers typically want to retain the existing staff. The goal is to maintain a stable and strong team post-sale.
Training and transition
The seller usually trains the buyer in business operations during a transition period that can last up to a year. New owners should avoid making significant changes initially, focusing instead on stability and small, positive improvements.
During the transition, maintaining an open-door policy allows employees to voice concerns and feel heard, building trust and preventing issues from escalating.
Believe in your team
People are one of the top value drivers in a small-to-mid-sized organization, and this holds true in a sale. Building a solid team and managing the transition carefully can enhance your business’s value. Thoughtful preparation, strategic communication, and professional guidance are essential for supporting staff when exiting a business successfully.
